As legislators and Gov. Arnold Schwarzenegger wend their way through seemingly endless budget negotiations, with more due to begin in May, it would behoove all of them to read a 2008 book by two Harvard economists called “The Race Between Education and Technology.”

If they do, they’ll see that authors Claudia Goldin and Lawrence Katz establish a clear link between the number of high school and college graduates produced in any modern society and its economic growth.

Businesses move to areas where the corps of educated workers exceeds the supply of jobs, the economics professors found. Surprisingly, it’s places with the most generally educated and least specialized work forces that do the best. For a general education teaches future workers to think, which allows them to adapt to new developments in an era of steady changes while specialized vocationally-oriented training ties them to existing technology.

There’s a strong message here for California. This state became the world’s fastest-growing region and spawned more successful businesses than any other during the first eight decades of the 20th Century. But it has fallen back a bit since. We’re no longer arguing over whether California is the fourth or fifth largest economy in the world – a big issue in the 2002 campaign for governor – but have calmly settled into seventh place. Why? Because of a slowdown in the growth of our cadre of educated workers.

Between 1980 and 2005, the percentage of high school graduates who completed college rose just from 24 percent to 32 percent. That sounds OK, but it’s not much compared with what happened between 1950 and 1980, when college graduation rates tripled from about 8percent to 24 percent.

It was no accident that some businesses began relocating outside California after 1980.

The message budget writers need to take from this: It’s time to stop making public schools and universities the first things they cut.

Ironically, the very politicians most prone to doing this are the ones who run time after time on a platform of encouraging business growth, claiming that only by electing them can Californians prevent major businesses from moving out of state.

Schwarzenegger is a prime example of this, whining whenever he runs that taxes and government regulations are pushing businesses out of California. At the same time, he’s tried time after time to “borrow” money from public schools’ budget entitlements, constantly griping that the 1988 Proposition 98 guarantees too much of each year’s budget for elementary and high schools.

If Goldin and Katz are correct, and there’s plenty of evidence they are, Schwarzenegger’s stances represent a classic contradiction. He wants businesses to stay, but opposes the one measure with the best chance of getting them to do so. What’s more, upcoming slashes in student body size at both the University of California and the California State University system will virtually guarantee some sort of business exodus – after Schwarzenegger is long gone from office. Never mind that two new businesses start up here for every one that leaves. No one wants to lose established, successful enterprises.

Proposition 98 assures public schools a minimum of 39 percent of each year’s budget, and proportionally more when enrollment grows. But Schwarzenegger’s budgets have often siphoned education funds off to other areas – including the fast-growing prison system.

It’s possible the just-released ruling of a three-judge federal panel requiring more than 50,000 inmate releases over the next three years due to prison overcrowding will take some pressure off the education budget. If they happen, the releases should cut state prison spending by $1 billion or more.

Even before the latest budget deadlock, funding had already been lopped for specialized high school programs, instructional improvement block grants, educational technology, buying instructional materials, gifted and talented education, school safety and grants enabling year-round classes. Funding for counseling, child nutrition, class-size reduction, English as a second language instruction and many other areas has not grown in at least two years.

No wonder state Schools Superintendent Jack O’Connell warned last winter that California schools are “in a precarious position.”

Yet, every deficit-reduction plan proposed this winter cut school spending by $5 billion or more, as lawmakers and the governor failed to realize that the more they cut education, the worse the future gets for business.

California led the world in growth when it pioneered community colleges and set up history’s largest public university system. As support ebbed for those institutions and the schools that feed students into them, so did business growth.

It is now apparent this was no coincidence. So the message to all allegedly business-

friendly politicians, starting with Schwarzen-

egger, is really pretty simple:

Cut school funding and reduce education opportunities and you cut off future economic growth. If your pro-business rants have any truth to them, you’ll somehow find a way to stop the constant reductions in education funding – starting with the new 2009-2010 budget on which you will soon begin the preliminary haggling.

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